The Microsoft Exchange Team just posted the inner works of the free/busy here:
As you might know the free/busy info is updated by the client. Is that the best arcitechture? I've always wondered. It seems, for now, this will go on with Exchange 2007 though the updating will be done using some XML publishing type service, but only when Outlook 2007 is used. This will possibly broaden the number of applications that can publish and read free/busy information in the future to all kinds of mobile devices.